Monday, August 24, 2009

You had 250, now you have 1. (MXM)

AlphaNinja - Maxxam Inc. (MXM) has an interesting idea for cost-cutting -->> suspending the filing of SEC statements.

"HOUSTON--(BUSINESS WIRE)--MAXXAM Inc. (NYSE Amex: MXM) announced that it will convene, as promptly as practicable, a special meeting of its stockholders to approve, subject to final action by the Board of Directors of MAXXAM Inc. (“MAXXAM” or the “Company”), a 1-for-250 reverse stock split of the Company’s common stock and preferred stock. The purpose of the reverse stock split is to reduce the number of holders of record of MAXXAM common stock below 300, which will permit the Company to suspend its reporting obligations and deregister its common stock under the Securities Exchange Act of 1934, as amended. Terminating the Company’s status as a public company will allow the Company to realize substantial cost savings on an ongoing basis."

I understand that small companies face exorbitant "public market" costs, at least relative to larger companies as a percent of their general spending. But SEC filings are what hold the company accountable to shareholders, so I'm not sure this is great news.

And if you don't own 250 shares? You're forcefully cashed out:

In the reverse stock split:
-Stockholders who own fewer than 250 shares of common stock or preferred stock on the effective date will be entitled to receive cash (without interest) in the amount of $10.77 for each share of common stock and $11.52 for each share of preferred stock they own.

At the end of the day, given this company's performance, ongoing legal issues, and "drying-up" source of revenue, one might be pleased to accept a cash-out. In reality, this company is hardly public right now anyway, given this ownership stake:

Our Chairman controls the election of the Company’s Board of Directors.
Charles E. Hurwitz, the Company’s Chairman of the Board, controls a majority of the Company’s common stock (the “Common Stock” ) and 84.4% of the Company’s total combined voting power. As a result, Mr. Hurwitz is able to control the election of the Company’s Board of Directors and controls the vote on virtually all matters which might be submitted to a vote of our stockholders.

Risks Related to Our Real Estate Operations
Revenues for our real estate operations are expected to decline for the foreseeable future.
In 2005, our real estate operations realized substantial revenues related to sales of residential lots and acreage at our Fountain Hills, Mirada and Palmas developments. As the proceeds from these asset sales have not been redeployed to other real estate assets and there have been significant declines in real estate demand in areas where the Company operates, this level of sales activity is not expected to recur for some time.

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